Cutting $101 million of annual revenue out of Duke Energy Carolinas’ proposed $220 million rate hike required months of negotiations and more than three dozen adjustments to the utility’s original proposal.

The many changes include some as small as $1,000. There were a few small items that increased from Duke’s original request — often because the original request was based on an estimate, and the final results were based on actual expenses for the period used in calculating the revenue Duke is entitled to raise from S.C. customers.

But there were a few big-ticket items, including $11.4 million for bonus payments to Duke (NYSE:DUK) workers that customer advocates asked the company to remove from its charges to S.C. customers.

Bonus payments

Leigh Ford of the Office of Regulatory Staff, charged with protecting the interest of the little guy in South Carolina, says that figure was part of the bonuses considered to have been awarded to Duke executives and other employees based on the stock’s performance. Since that doesn’t benefit customers, they should not have to pay for it, she says.

Duke negotiated the settlement agreement with the ORS, the S.C Energy Users Committee (which represents industrial customers), Wal-Mart and the S.C. Small Business Chamber of Commerce. After the deal was announced, the last two formal intervenors, the pubic works division of the City of Spartanburg and the Spartanburg Sanitary District, signed off on the agreement.

But a large number of customers remain opposed. The S.C. Public Service Commission says it has received correspondence from more than 1,700 protesters. The ultimate decision on Duke’s rates will be made by the S.C. Public Service Commission in hearings that start July 31.

Long talks

Dukes Scott, executive director of the ORS, says the negotiations on the proposed settlement started about the time Duke asked for a 15.1% rate hike in March.

Duke and some intervenors got the largest adjustment out of the way three weeks ago. Duke agreed to cut its proposed return on equity to 10.2% from a requested rate of 11.25%.

The annual return is a major component of any rate-hike request. In this case, the agreement cut $38 million from what Duke wanted to charge customers. Removing the portion of bonuses paid to Duke employees was the next largest item.

Plant-cost deferrals

More was cut from the request by changing how Duke charged customers for new generation units at Cliffside Steam Station and the Buck and Dan River natural gas plants, the Bridgewater hydro plant improvements as well as upgrades to the Oconee and McGuire nuclear plants.

These involved deferrals — money that Duke is allowed to recover while operating those plants during several months when the plants were not yet in the rate base. Duke had proposed amortizing those costs over five years. But it agreed to amortize the costs over the lives of the plants. That reduced the rate hike by $8.8 million.

Ford says its like getting a 10-year loan on a car rather than a two-year loan. The principal still has to be paid, but you space the payments out over a longer time and reduce what has to be paid each year.

Seven days

After that, the negotiators agreed to eliminate $6.6 million Duke wanted annually for the cost of closing nuclear plants beyond the formal decommissioning costs. With closure of Duke’s plants about 30 years away, the negotiators agreed Duke did not need to start collecting those charges now.

Duke had proposed spending additional money on controlling trees and other vegetation around its transmission lines. But it agreed to keep spending in line with current costs, eliminating a $5 million increase. Duke also will change the way it calculates anticipated costs for storm repair, which reduced its request by $2.4 million.

Those adjustments account for $72 million of the reduction in the rate request. Most of the remaining $29 million in adjustments are much smaller and technical.

Scott notes the commission has asked any settlements of this sort be presented to the commission seven days before any hearings, to give it time for review. With the last formal opponents agreeing to the deal Wednesday, this proposal just makes that deadline. It will be the proposal before the commission when the hearings start next week.